Disclose super’s benchmarks: ASIC

The head of the corporate regulator wants super funds and money managers to disclose how their performance stacks up internationally, so investors can challenge how their funds are invested.

Australian Securities and Investments Commission chairman
Greg Medcraft
also warned that regulators around the world are “very concerned" about systemic risks posed by high-frequency trading (HFT) in the wake of the “flash crash" and last month’s rogue algorithm at Knight Capital in the United States.

“Regulators around the world are very concerned about systemic risk on high-frequency trading. We have already had the flash crash, we have had Knight Capital, but there have been incidents in other major markets as well so it is a matter which is troubling regulators," he told a parliamentary committee last night.

ASIC deputy commissioner
Belinda Gibson
said while algorithmic and HFT was sometimes manipulative and illegal, it was more often simply predatory to investors.

“The whole of the market is concerned about the preponderance of HFT . . . some of it is possibly outright manipulative and a breach of the law but there is quite a bit of it that people see as predatory," Ms Gibson said.

ASIC is releasing proposed new rules next month that include making “kill switches" mandatory but last night rejected accusations it was “behind the eight ball", claiming it had taken time to put the appropriate technology and surveillance systems in place.

On Australia’s $1.8 trillion funds management industry, Mr Medcraft’s mission to lift transparency was sparked after he was told by one of the largest industry funds, AustralianSuper, that specific information on where his super was invested was not available. Mr Medcraft is already leading a push for funds to tell their members exactly what shares, property and other investments are held on their behalf.

“I think we want Australians to engage more with their asset allocation and perhaps one of the things we have suggested would be that, on their superannuation statements, their asset allocation is disclosed but perhaps that it is benchmarked against some international standard so Australians can compare where they are at," Mr Medcraft said. “Perhaps a good manager might explain if not why not they might be different from an international standard," he said.

Related Quotes

Company Profile

Mr Medcraft said while most international fund managers targeted a 3 per cent return, most managers in Organisation for Economic Co-operation and Development countries were far more weighted towards fixed income than shares when compared with Australia.

“If we could at least get people to compare, think about and challenge their asset allocation, it would be a good thing to see on the statements. So they could start to ask ‘well why am I 70 per cent in equities when compared to the rest of the world which is only 30 per cent’?" Mr Medcraft said.

ASIC was questioned on why it took less than three months to decide not to bring any civil cation for breach of directors duties in the wake of the Securency and Note Printing Australia bribery scandal surrounding the Reserve Bank of Australia.

And the regulator revealed it was unlikely to recover any funds from their investigations into the $176 million collapse of Trio Capital (formerly Astarra Capital) in 2009. However it has approved an additional $180,000 to the liquidator investigate a related fund. ASIC said it was continuing to investigate Eugene Liu and others as well as the auditors.

“[But] I need to be frank with the committee . . . we can’t be confident that the funds will be located or it will be possible to recover those funds from offshore," ASIC commissioner John Price said.

ASIC said it was also updating its information-sharing arrangements with APRA (Australian Prudential Regulation Authority) and the Australian Taxation Office after The Australian Financial Review revealed in May the ATO had been investigating the alleged mastermind behind the $176 million Trio theft, Jack Flader, a decade before the ­collapse occurred.